Accounting & Bookkeeping Group Australiahttps://abgaustralia.wordpress.com
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Tue, 22 Jan 2019 00:57:41 +0000 en
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1 http://wordpress.com/https://secure.gravatar.com/blavatar/af2e55ca15ded0cb057520964c19d3ac?s=96&d=https%3A%2F%2Fs0.wp.com%2Fi%2Fbuttonw-com.pngAccounting & Bookkeeping Group Australiahttps://abgaustralia.wordpress.com
Why my income is dropping.https://abgaustralia.wordpress.com/2012/09/27/why-my-income-is-dropping/
https://abgaustralia.wordpress.com/2012/09/27/why-my-income-is-dropping/#respondThu, 27 Sep 2012 13:52:37 +0000http://abgaustralia.wordpress.com/?p=120We went to see a client today to sort out his messy books about 3 years behind. He is around 29 years old and he is a builder, have a nice beautiful house just almost get out of terrible divorce. All was good but after we have almost sorted out his documents he asked me “Why my income is dropping”. I stopped a little while and started preaching. I said because you are not selling, you have no selling skills, selling = income, no sell= no income. He asked how do I know he is not selling. I asked him do you have a website, he said no, I asked do you do advertisement, he said no, do you have business cards, he gave me one with old company name, I asked where you get your clients from, he said most from referrals really. I told him referrals are good and in most cases very effective but you need to have a sizable customers before you get regular referrals, no wonder your income is dropping, he was speechless…

Let we go, I have done too many bookkeeping and accounting staff, now I really think I should teach people how to sell, because this is more important for most of business than tax bills, remember this Sells = to income, no sell = no income. More sale = more income.

]]>https://abgaustralia.wordpress.com/2012/09/27/why-my-income-is-dropping/feed/0abgaustraliaHow to pay less tax on your investmentshttps://abgaustralia.wordpress.com/2012/01/21/how-to-pay-less-tax-on-your-investments/
https://abgaustralia.wordpress.com/2012/01/21/how-to-pay-less-tax-on-your-investments/#respondSat, 21 Jan 2012 06:44:07 +0000http://abgaustralia.wordpress.com/?p=117Now you’ve found the right investments, it’s time to consider the right investment vehicle. There are four possible investment structures, each with its pros and cons, especially when it comes to taxation:

■ buy the investments in your own name, in your partner’s name, or both;

■ invest via a self-managed superannuation fund;

■ use a company structure; or

■ set up a family trust.

Generally, it pays to invest in the name of the person with the lowest rate of personal income tax, but capital gains tax considerations can also come into play.

Minimisation good, evasion bad

Tax minimisation – as opposed to tax evasion – is a perfectly legitimate goal when structuring your financial affairs. Income splitting, timing investment transactions and negative gearing are just some of the ways you can limit the eroding effects of tax.

However, tax law is complex and ever changing, so it’s an area where specialist, individual advice is crucial.

And you should never let tax considerations overwhelm your investment decisions. A bad investment is still a bad investment even if, on the face of it, it’s a tax-effective one. There’s no glory in saving tax when you’re losing money on the investment itself.

Income splitting

While some forms of income splitting are prohibited, when it comes to investments households can make decisions about whose name assets should be held in to achieve the best tax result.

Assets could be held jointly, so each party’s tax-free threshold comes into play when the income from those assets is taxed. Or the assets could be in the name of the person on the lower personal income tax rate.

Capital gains tax

A capital gain or capital loss is the difference between the proceeds when you sell an asset and its original purchase price.

Capital gains tax applies to assets bought since September 19, 1985 (when the tax was introduced). It’s applied at your marginal tax rate – in other words, the top tax bracket into which you fall.

But there are two ways you can minimise the amount of CGT you pay. First, hold an asset for more than 12 months and you’ll pay CGT on only half the capital gain. Second, because the tax is applied to your net capital gains you can time asset sales so your capital losses partly or wholly offset your capital gains.

Negative gearing

Negative gearing occurs when the interest you pay on your borrowing for an investment – usually property – is greater than the income from that investment. On the face of it, that’s not a great result. But you can use this shortfall to reduce your taxable income and therefore the amount of tax you pay.

Again, don’t let the tax benefit blind you to all other considerations. You may get a tax break but you still have to be able to meet interest payments on your investment loan.

Apart from the tax break, people negatively gear because they’re more interested in the potential capital gain on a property than the rental income in the meantime. But another risk is that the value of the property will fall.

Superannuation

Of course, another effective way of accumulating wealth is super, which qualifies for attractive tax breaks.

Investment earnings in super funds are taxed at the concessional rate of 15 per cent. That’s likely to be much less than the marginal tax rate you’re paying on other investment earnings – up to 47 per cent if you’re in the top tax bracket.

And there are ways to maximise your super savings.

On the down side, super is heavily regulated, the rules tend to change, and your money is tied up until retirement age. Younger investors may want to keep some of their money in more liquid assets that are more easily accessed.

]]>https://abgaustralia.wordpress.com/2012/01/21/how-to-pay-less-tax-on-your-investments/feed/0abgaustraliaWhat a company’s financial statements meanhttps://abgaustralia.wordpress.com/2012/01/09/what-a-companys-financial-statements-mean/
https://abgaustralia.wordpress.com/2012/01/09/what-a-companys-financial-statements-mean/#respondMon, 09 Jan 2012 08:17:40 +0000http://abgaustralia.wordpress.com/?p=115Looking at a company’s annual reports will tell you a lot about the business. Essentially, what you want is a business with little or no debt that is generating high returns on equity. Keep that in mind as we take a tour through the three statements that form the core of a company’s financial reporting.

The balance sheet

Rule No.1 in investing is: don’t lose your capital. The balance sheet is where you can start to get a feel for whether a company is destined for failure. When things turn sour a heavily indebted company can quickly find that it’s unable to meet its obligations.

A common way to measure the “gearing” of a business is by dividing total debt (say, net of cash) by the total value of the assets (or sometimes the equity) on the balance sheet.

How much debt a company can manage depends on how reliable its earnings are, but for your standard, industrial-type company a ratio of less than 50 per cent debt to total assets is a good starting point.

You can also judge a company’s ability to meet its obligations by turning to the income statement to measure its “interest cover”, which is operating earnings before interest and tax divided by the total interest payments. A cover of four times is solid.

Rising debt could mean the company can’t generate enough cash to fund itself – not a good sign. Similarly, falling debt could mean the opposite.

Income statement

This is where you’ll find the company’s profit. However, be aware that tax rates, writeoffs, acquisitions, one-off sales and cost-cutting can serve to obscure the true, underlying performance of the business.

This is why many analysts prefer to look at the statement of cash flow, which is harder to manipulate.

Nevertheless, tracking the trajectory of operating revenue – “top-line” growth – will give you a good feel as to whether the business is expanding.

Of course, the company could just be raising more and more shareholder equity to fund that growth, which is bad news from an investor’s point of view.

That makes return on equity (ROE) a crucial figure. It’s calculated as the earnings per share (before “extraordinary” or one-off items) divided by the total number of shares outstanding.

All these figures should be disclosed by the company. An ROE above 15 is very good, and one above 20 is excellent.

Cash flow statement

Cash flow is the lifeblood of a business. A business with no profit can live to fight another day; one with no cash flow cannot.

Companies can generate cash from their daily business operations, by selling large fixed assets or by borrowing or raising capital.

Obviously what you want is a company that’s generating a lot of cash through the course of its normal operations, and at a rate above what it needs just to operate.

That leaves it with enough cash to be able to distribute some to investors via dividends or share buybacks, or to reinvest in the business for growth.

Patrick Commins Smart Investor

]]>https://abgaustralia.wordpress.com/2012/01/09/what-a-companys-financial-statements-mean/feed/0abgaustraliaAccountants – Why Financial Forecasting Is Critical To Survivalhttps://abgaustralia.wordpress.com/2011/12/20/accountants-why-financial-forecasting-is-critical-to-survival/
https://abgaustralia.wordpress.com/2011/12/20/accountants-why-financial-forecasting-is-critical-to-survival/#respondTue, 20 Dec 2011 03:14:25 +0000http://abgaustralia.wordpress.com/?p=111Success is not as elusive as you might think; it is actually manageable. Managing the success of your business requires smart budgeting and forecasting, something which accountants specialise in. It is not required that you fight it out alone. In fact you can have a team of professionals to support you in managing your business success.

Financial forecasting is of course no easy task. A lot of factors change over time, making the market more volatile than it already is. Nevertheless, the foundations of forecasting do not change. Planning your future can be challenging but being pro-active and planning ahead can enable greater success. It can enable you to set the course of your business to where you want it to be.

First off, it’s important for your financial forecast to be comprehensive. This means that you prepare all the projected financial statements that allow you to determine future levels of accounts, including profits and debts. With the aid of accountants, you can develop a financial plan that’s comprehensive and accurate, making forecasting a lot easier.

Two of the most critical projected financial statements are pro forma income statements and pro forma balance sheets, as well as projected cash flow. Pro forma income statements help you project anticipated earnings within a specific period. To derive this, you generally need to establish a sales projection, create a production schedule, determine other expenditures and then compute projected profit.

However, financial planning does not end with anticipating earnings. It is not enough to show forecasted profits because what’s more important is cash-on-hand. Thus, you also need to make projected cash flows and then present a plan for managing cash flow. Managing cash flow includes budgeting and you should look to contact accountants at any stage, if you need expert help in this area. Cash is what makes your business, or any business for that matter, so it is important to stay afloat.

Projected balance sheets on the other hand provide you with information on the expected cumulative changes to your business, particularly net worth. It is not enough to just see your company’s assets grow but it is also important to understand whether you’re incurring a lot of debt as a consequence, which may be bad for your bottom line.

Projections, no matter how accurately done they may be, are subject to adjustments. Actual results can be significantly different from your projections. Your business can end up with any one of the possible scenarios identified through financial analysis. Luckily, your accountants can help you with simulating alternative outcomes and help you prepare for each one, making you always on top of your game.

If you are a contract worker or freelancer operating your own personal limited company, you should really be using an accounting firm that specialises in solutions for contract workers. Here are the reasons why you should consider using accountants for contractors:

1 – Specialists
Accountants for contractors will give you best advice on how to operate your company in the most tax efficient way as a contract worker. You have access to tax saving initiatives such as the FLAT RATE VAT scheme, which you may not be advised about when using a traditional accountancy practice.

2 – Financial Advice
Many accountants for contractors can also provide financial advice on mortgages, pensions and insurance which are specifically designed for contractors and freelancers.

3 – More personable
Generally speaking the service you will receive from accountants for contractors will be more personable than a traditional accountancy practice. It is likely you will be allocated a dedicated Account Manager who you will be able to contact on a regular basis.

4 – Can take the weight off your shoulders
Accountants for Contractors tend to have tailored accounting packages designed specifically for contractors that do not want the burden of administering their bookkeeping, tax affairs and general administration. It is likely that you will not find a package specifically for contractors when using a traditional accountancy practice.

5 – Fixed monthly fee
Contractor accountants should only promote a fixed monthly fee. If you do come across an accountancy firm charging a percentage of your turnover run a mile!

What should your accountants do for you?

Here are some of the accounting features your contractor accountants should offer:

]]>https://abgaustralia.wordpress.com/2011/12/10/accountants-for-contractors-vs-traditional-accountants/feed/0abgaustraliaAccounting Terms That Business Owners Need to Learnhttps://abgaustralia.wordpress.com/2011/11/04/accounting-terms-that-business-owners-need-to-learn/
https://abgaustralia.wordpress.com/2011/11/04/accounting-terms-that-business-owners-need-to-learn/#respondFri, 04 Nov 2011 01:43:09 +0000http://abgaustralia.wordpress.com/?p=105Business owners commonly employ an accountant to handle the finances. Thus the finance management will be more professional and they can stay focus on other aspects of their business. If you have just started your business, below are accounting terms you need to learn:

1. Net Income: This term is sometimes called as “net profit” or “earnings”. You can obtain net income after subtracting the earning with the expenses you have spent. The remaining amount of money is what so called as net income.

2. Expenses: Expenses are charges that your business spends when selling products or providing services. Salaries, transportation and material costs are considered as expenses.

3. Liability: Liability can be defined as a debt that your company must pay on time. For a business, liabilities include bonds payable, accounts payable and taxes due.

4. Bookkeeping: This is a process of recording your business transaction into the finance book. The transactions that you have to record are income, purchases, sales and payments.

5. Asset: Asset is any item owned by business owner that has value. Business asset commonly lasts for several years such as the machine for production process, cars and office furniture. Company cash and logos are also included as asset.

6. Active Revenue: It is a payment that you receive for a service your business has performed. When your client pays for your service, the money is considered as active revenue.

7. Passive Revenue: This is revenue that your business receives without your direct involvement in the business activity. For example, if you run a business in rental property but you hire a management team to handle the facility then you receive passive revenue.

8. Balance Sheet: A balance sheet shows your business’ financial position in a period of time. A balance sheet commonly summarizes assets, ownership equity and liabilities.

9. Income Statement: Income statement explains about your business’s profits or losses in a period of time. It clearly shows the revenue you have received and the operating expenses during that time.

10. Accounts Receivable: When your customers haven’t paid the goods that you supplied, they owe the money to you and it is called as accounts receivable. The account receivables are noted as current assets on the balance sheet.

11. Accounts Payable: Accounts payable is the bills that you haven’t paid to your vendors or suppliers. The total of your accounts payable is considered as current liability on the balance sheet.

]]>https://abgaustralia.wordpress.com/2011/11/04/accounting-terms-that-business-owners-need-to-learn/feed/0abgaustraliaLocal Or National Accountants, Does It Matter?https://abgaustralia.wordpress.com/2011/10/28/local-or-national-accountants-does-it-matter/
https://abgaustralia.wordpress.com/2011/10/28/local-or-national-accountants-does-it-matter/#respondFri, 28 Oct 2011 06:33:09 +0000http://abgaustralia.wordpress.com/?p=101Prior to the days of the Internet, a small business owner would usually be restricted to choosing a locally based accountants to deal with their business administration. However, since the Internet has made it easier to gain access to a multitude of services and products, a business can outsource bookkeeping duties to a national accountants, anywhere in the country. With the importance of location out of the equation, the other factors to consider are whether the online national accountants is qualified to deal with your business, the cost and access details.

A locally based accountancy would have been preferable to a national accountants before the Internet, as frequent trips would have to be made to hold meetings, deliver documentation and other aspects. An accountancy firm which was based locally would keep travelling and communication times and costs to a minimum. Sending information by post was previously the most convenient method to communicate, even with a local accountants. However, if any queries arose, or further information was required, the telephone was often the only method of communication left open to both parties, which isn’t always convenient and can be expensive.

As a large number of people now deal with all aspects of their life online, it makes sense for a business to do the same. Online accountancy is low cost, speedy and convenient and also allows you to select an accountancy from anywhere in the country. A national accountants will offer the same service as a locally based accountants, but will provide increased accuracy using real time information, and convenience. The costs will be kept low as the national accountants maximise the efficiency of online accounting to reduce overheads, passing the savings on to the client.

When a business owner is deciding which accountant will be beneficial to the company, it is imperative that they decide whether face to face contact is important to them. A large number of business owners are happy to submit documentation and provide information, leaving their accountant to deal with ATO. Some business owners would rather meet occasionally to discuss their business, which would probably mean a locally based accountants for convenience.

Deciding on a national accountants gives greater choice than being restricted to a locally based accountancy. The size of the accountancy should also be considered, as a business needs attention all year round, especially when staying within relevant filing deadlines. A small, locally based accountants may provide an excellent service, but what happens if they are taking annual leave or are sick? Choosing a national accountancy will provide freedom to choose a company with several accountants who are able to deal with a business. An online accountancy provides freedom of choice so that a business owner will be able to manage his business, knowing that administration is dealt with in a timely manner, wherever they are situated in the country.

QuickBooks, hosted by Reckon Online is an online version of Quicken’s QuickBooks Enterprise desktop accounting software and is hosted from two data centres operated by the licensee for Quicken in Australia. It is not related to the five cloud versions of Quicken available in the US.

QuickBooks, hosted by Reckon Online is the only online version of QuickBooks available in Australia. Reckon Online is an arm of Reckon Limited, a company listed on the Australian Stock Exchange which owns the Australian licensee of Quicken software, Quicken Australia.

Because QuickBooks, hosted by Reckon Online is the hosted QuickBooks Enterprise desktop version, users can buy QuickBooks Enterprise for their laptop and download the company file for working offline.

Reckon Online has integrated QuickBooks with tools that let it access information on remote hard drives and print reports to local or remotely networked printers. Payslips, invoices and remittance advices can be emailed directly from a linked email address.

Other Australia-only features include real-time BAS lodgement through Reckon GovConnect, which pre-fills your lodgement form with data direct form the Australian Taxation Office. Users receive real-time feedback and lodgement confirmation. QuickBooks “hosted” also has a tool to calculate payments for paid parental leave, in compliance with the Federal Government scheme.

Business performance can be monitored by using a customisable company snapshot tool. Customisable fields and graphs allow you to design a ‘snapshot’ that presents the most significant information that impacts business decisions, down to transaction, customer or supplier details.

Activity-based settings control which areas of the software a user has access to based on their role. The data file is backed up daily, and updates occur automatically to keep the software in line with changes to legislation.
Another security feature is an audit trail to help a business’ accountant identify trouble spots and mis-postings within the accounts.

QuickBooks “hosted” has detailed inventory management that can track expenses, inventory and component levels for assembled products. Payroll management includes the ability to create and schedule payments, email pay slips to employees, and split pay into multiple bank accounts.

QuickBooks “hosted” can work with multiple currencies and has multi-company reporting which combines reports from subsidiaries, divisions or branches.

Reckon Online charges $295 a year for every PC user. Mac users pay $415 a year, a 40 percent premium, which covers the cost of special software (a virtualisation tool by Citrix) that Reckon requires to display the hosted QuickBooks on a Mac computer or mobile device.

]]>https://abgaustralia.wordpress.com/2011/10/21/quickbooks-hosted-by-reckon-online-what-it-is/feed/2abgaustraliaWhy set up a trust?https://abgaustralia.wordpress.com/2011/10/11/why-set-up-a-trust/
https://abgaustralia.wordpress.com/2011/10/11/why-set-up-a-trust/#commentsTue, 11 Oct 2011 00:53:34 +0000http://abgaustralia.wordpress.com/?p=95In the past trusts tended to be the investment vehicle of the rich, however in recent times many Australians from all walks of life have begun using trusts to hold their assets. So why do people invest using a trust?

Tax benefits: You be able to reduce your tax bill by distributing income to family members with lower taxable income. We recommend that you seek financial advice from your accountant to find out what benefits you may receive.

Asset protection: Trusts allow you to control & receive income from assets without having them in your name. This may protect these assets in the event that you are sued or go through a divorce. Specialist asset protection lawyers can assist you to structure your assets correctly to prevent losses.

Estate planning: Some trusts may allow you to effectively pass assets on to future generations without paying excessive taxes or going through estate disputes.

How do you set up a trust?

You can set up almost any standard trust (Discretionary, Family, Unit) online using Cleardocs, Shelfco, Law Central or Corporate Express. You may be able to set up a Hybrid trust, SMSF trust online however many people prefer to use an accountant.

Once the trust deed has been created and signed the settlor places a nominal sum (usually $10) in the trust. The deed can be sent to the state government for stamping and then the trust is fully operational.

We strongly recommend that you see an accountant and seek financial advice before setting up a trust. Online trusts are a cost effective way to set up a trust, however they will end up costing you more in the long run if you don’t set up the trust in the right way.

How can a trust own assets for someone else?

Assets are held “in trust” for beneficiaries who receive income and other benefits from these assets without actually owning them. The trustee is the one who manages the trust for the beneficiaries.

For example if you buy a property in a trust then the title deeds may show “ABC Pty Ltd As Trustee For The Smith Family Trust”. In some states such as QLD only the name of the trustee is shown on title e.g. “ABC Pty Ltd”.
Understanding Trust Jargon

Here is a list of trust related terms & jargon that you might come across:

Appointer: The appointer has the power to fire the trustee and appoint a new trustee. The appointer is specified in the trust deed.

As Trustee For (ATF): This is a legal term meaning that the asset is owned by one entity as trustee for another or that the entity is acting as trustee.

Beneficiary: The person(s) that receive benefits from the assets held in trust. Generally this is in the form of trust distributions.

Company constitution: If the trustee is a company then there is a company constitution guiding how the company is to be run and what rules it must follow.

Corporate trustee: A trustee that is a company.

Director of trustee: The director of the trustee company.

Held in trust: Assets owned by the trust on behalf of the beneficiaries.

In Its Own Capacity (IIOC): A legal term meaning that a trustee is acting on behalf of itself. For example a trustee may apply for a loan in the following name “ABC Pty Ltd IIOC & ATF The Smith Family Trust”.

Individual trustee: A trustee that is a natural person, i.e. not a company.

Settlor: The person who settles (opens) the trust by depositing the first money in it.

Stamp duty: A fee paid to your state government when opening a trust.

Trust deed: The legal document governing the operation of a trust. The trust deed names the trustee, beneficiaries, settlor and appointer and contains the rules that they must follow when dealing with the trust.

Trust distributions: Income or assets distributed from the trust to the beneficiaries.

Trust registration: The act of stamping and registering the trust with the state government.

Trust: A legal instrument used by one party (the trustee) to hold assets on behalf of another (the beneficiaries).

Trustee: The person or company that runs the trust and manages the assets on behalf of the beneficiaries.

Unit holder: The owner of units in a unit trust.

Unit: A share of a unit trust which denotes entitlement to a share of the assets within that trust.
Trustee duties & powers

The powers that the trustee has are listed in the trust deed, and so may vary from trust to trust. Generally the trustee has few limits on its powers as long as it is following its duty by acting in the interests of the beneficiaries.

Lenders will always check your trust deed to make sure that the trustee has the power to apply for loans for the trust.

As a general rule trusts are required to lodge a tax return just like a company or a person. Trusts are charged the highest possible level of tax which is why income is usually distributed to the beneficiaries at the end of each financial year.

Taxation rules for trusts are complex and vary between different trust types. Contact your accountant for specific financial advice for your trust.

]]>https://abgaustralia.wordpress.com/2011/10/11/why-set-up-a-trust/feed/1abgaustraliaKnow Your Accounting Methodshttps://abgaustralia.wordpress.com/2011/06/10/know-your-accounting-methods/
https://abgaustralia.wordpress.com/2011/06/10/know-your-accounting-methods/#respondFri, 10 Jun 2011 02:13:35 +0000http://abgaustralia.wordpress.com/?p=56Whether you are a physical or digital business, accounting is necessary; it is in analogy similar to the heart of an organism. From payroll taxes to sales tax and income tax; it is essential the documentation is in order. And such documentation will allow you to gauge your organization’s standing at all times and assist in reporting and paying the appropriate amounts of various taxes. Accounting allows for the receiving of revenue, paying of debts and the balancing of books. When done right, it will accurately predict your businesses’ financial position and be able to assist on future profit projections for your company.

Knowing your accounting methods is simply being able to distinguish between the two kinds that are frequently utilized. And what are these two methods? Well, the two standard methods of accounting are the accrual and cash method. How do they differ? Simple, the accrual method of accounting requires you to record all income as soon as a sale is made; regardless of whether or not payment was received. Likewise, it requires you to every expense when incurred regardless of when the expenses are actually paid. The IRS promotes the accrual method because it more accurately matches income with expenses..

The second type of accounting method is the cash method. Unlike the accrual method, with the cash method, transactions are only recorded when money is paid or received and expenses are recorded when actually paid. The cash method is not recommended in business settings as it may misrepresent the finances of a small business. As an example, a company that was paid by all its customers, and is yet to pay its debts, will be construed as having more than it does (when in reality it is not the case). By the same token, if a company paid its debts, and is yet to receive payment from its customers; the books would show negative.

While the accrual method may be more accurate, the cash method is much easier for the lay person to understand and accomplish. For this reason, the Internal Revenue Service allows most small businesses to use the cash method of accounting. By knowing your accounting methods, you know exactly what to look for in an accountant. You are able to come together and make financial decisions that affect your business as a whole, e.g., whether or not to use an accounting program like Quickbooks or Peachtree. Although the issue of manual versus electronic accounting still presents itself every now and then, electronic record keeping beats manual record keeping in efficiency and speed. In general, know and comprehend the methods you use in accounting.

As we all know, doing too many things at once reduces the effectiveness of such an outcome, which is why you need a highly skilled CPA with a track record of helping business owners improve their businesses. Certified Public Accountants and Certified Quickbooks Pro Advisors are the preferred choices to provide first-rate support on your accounting needs. These professionals will take care of your accounting needs, while you take care of business needs.